A 1000-Point Drop Isn't Overheating: Memory and Optical Bad News, Moving-Average Trimming Discipline, and Buying the Pullback
TL;DR: The market's drop of about 1000 points still isn't overheating, and the memory and optical communications news is mostly short-term negative or emotional selling, so the speaker trims holdings to 70–75% in stages as the index breaks the 5-day, 10-day and monthly lines, and treats the pullback as a chance to position in optical communications and PCB.
Key ideas
- With the Taiwan dollar weakening and the index still failing to reclaim the 5-day line after yesterday's pullback, the speaker cut holdings from the 80s% to 70–75%; his discipline is to trim once each on breaks of the 5-day line, 10-day line and monthly line, and it is still not too late to go long again after the index recovers.
- The memory bad news is only a short-term negative: CXMT's technical progress does not mean it has capacity, and expanding in a heavy-asset industry takes at least a year and a half; Nanya Technology's Q3 gross margin of 85.7% is higher than TSMC's, so it can't be viewed as just a cyclical stock. Copper-clad laminate prices have risen for the 8th time this year, so Taiwan's supply chain should not be treated as broadly hit just because share prices fell.
- 'New light vs. old light' is just a label stuck on 2 days of gains and losses; the real logic is that trading funds are limited and can only rotate within the same big sector. Optical communications and PCB are an unavoidable path for AI progress, so a bad-news selloff is an opportunity, and buying can start when prices fall near a moving average with support.
- Stock picking depends on pattern and price: the 'one-blade' pattern is volume at the bottom, then a move up once the supply of shares has been digested; Genius Electronic Optical has finished consolidating and can be attacked, while Grand Pacific Petrochemical's bottom sits at the 5-day line and the low of a red candle, making defense easy. In a bull market there are no bad companies, only whether they are cheap enough; a heavy-volume black candle at a high with huge volume, followed by another break of the 5-day line the next day, means it's time to leave.
- Elite Material hit limit-down, but at this level it should find support, and it is a company no one can replace; Landmark Optoelectronics' quarterly line is still intact and it has pulled back about 24.4% from 3600, so the speaker can skip optical communications but doesn't dare short it.
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Section summaries
0:05Taiwan Dollar Weakness and Lowering the Cash-Exposure Level
The speaker puts the Taiwan dollar exchange rate at the very front of his views every day. Because the Taiwan dollar keeps weakening, since last week he has mostly swapped stocks or lowered his exposure after taking profits, and his holdings have gone from the 80s% all the way down to about 70–75%, with orders placed as low as possible. As for the index falling about 1000 points, he thinks it is not yet overheated: nobody is using leverage across the board as in June and July, Koreans still dare not, and oil at about 106 is not too high. The direct reason for cutting exposure is that after yesterday's pullback the index still hasn't reclaimed the 5-day line, and if it opens lower the 5-day line will turn down. So he sold 2 stocks at the open (1 for profit, 1 for a stop-loss), took profit on 1 more near the close, and added 1 position during the session.
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4:15Memory Expansion Worries and the Arms Analogy
The Taiwan dollar has weakened back above 32, forming an upward W, and the speaker thinks a weaker Taiwan dollar is bad for stocks. The memory bad news is that China's CXMT reportedly made technical progress, raising competition worries, but he stresses that whatever news CXMT puts out, it is only a short-term negative for Taiwan stocks. Using an arms analogy, Samsung and SK Hynix accepted ASML's equipment price increases, meaning they are buying the most expensive weapons and won't be threatened by a rival's progress in back-end processes. More importantly, memory is a heavy-asset industry where expanding capacity takes at least a year and a half, and TSMC's expansion plans even run to 2030, so this drop is just emotional panic.
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9:55Optical Communications Slump and Buying the Pullback
US AI optical communications stocks fell sharply, with Lumentum dropping 10% the previous night; analysts link it closely to good news being fully priced in and profit-taking around the global summit held on the 12th in San Jose, California. The speaker argues that optical communications, CPO packaging and PCB are all an unavoidable path for AI progress, with no alternative; optical communications is still partly at the dream stage, so bad news is actually an opportunity, and those who haven't bought can start buying when prices fall near a moving average with support. Today, including 2455, the moves are just the first correction after a whole upward wave.
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14:45New Light vs. Old Light Labels and Fund Rotation
Some say the new light stocks (Largan, Genius Electronic Optical, etc.) will replace the old light stocks (Landmark Optoelectronics, WIN Semiconductors, etc.). The speaker disagrees, saying it is just a label stuck on 2 days of gains and losses: when Largan fell 2 weeks ago, it would also have been filed as old light. Citing a physical therapist's idea that subjective feeling can't be judged and one can only objectively compare before-and-after photos, he says new vs. old light is just a gut feeling, and compares it to how absurd it would be to split PCB into new and old. The real logic is that funds are limited: during the rally there were several days with turnover of 8000–9000 yi (hundred million), but funds can only look after some stocks within one big sector at a time, so it is rotation within the same sector. TSMC hadn't risen before its earnings call and the index hasn't firmly held its moving averages, yet he still favors heading toward 6 wan (ten-thousand) points, while only keeping a moderately bullish exposure level.
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18:55Moving-Average Trimming Discipline and the Price-Hike Cycle
When WIN Semiconductors rose to the previous high of 637, selling pressure from trapped holders breaking even appeared. The speaker says about 7–8 stocks in the past reached such a level, were pushed back on touching the previous high or a minor high, and exiting there has a high win rate; he gave his own holding as an example, which also met its largest recent volume and was pushed back today. With the index dropping nearly 1000 points and still breaking the 10-day line, he restated the discipline he agreed with members: trim first on a break of the 5-day line, trim again on the 10-day line, trim again on the monthly line, and going long again after it recovers is still in time. Only 2000 yi (hundred million) of funds could be used on optical communications today, so he chose to first support the index-weighted Largan and Genius Electronic Optical. On the other hand, copper-clad laminate has raised prices for the 8th time this year, expansion takes a year and a half, and it's been less than 1 year since price hikes began last year; since China could raise 8 times in a row, he thinks Taiwan's supply chain won't turn broadly negative just because share prices fell.
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24:05High-Margin Stocks and Earnings Support
Some treat memory as a cyclical stock, but Nanya Technology's Q3 gross margin reached 85.7%, higher than TSMC's, and Q4 gross margin is expected to beat Q3; Q3 average selling prices rose about 60%. The speaker uses a bank-robbery joke for contrast: even robbing 1000 wan (ten-thousand) you wouldn't get half, so with a gross margin under 50% you'd be better off being a Nanya Technology shareholder. He then cites Evergreen Marine: shipping was forgotten after its hottest period in 2020 and 2021, but earnings held up the share price, which is still over 200 rather than back at 50, and it attracted international fund buying. Nanya Technology fell more today, but before yesterday it had returned to the 530s; he says high-level consolidation need not be seen as bearish, and those who were bearish on Evergreen back then still haven't been proven right.
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29:15Genius Electronic Optical Finishes Consolidating, Ready to Attack
With the index down nearly 1000 points, small caps such as Tyc Technology and Radiant Opto-Electronics still hit limit-up. His assistant pointed out that most limit-up stocks are smaller, unfamiliar names, showing funds are still speculating, which is also why he lowered his exposure. Tyc Technology is a passive component stock with an AI theme. Genius Electronic Optical has finished consolidating in the 3-hundreds, selling pressure has been digested, and trapped holders sold out there and it was pulled up again; the pattern is strengthening and it can be attacked today, the key being whether it weakens tomorrow. If long-term development goes smoothly it should keep rising.
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30:55The One-Blade Pattern and a PCB Sector Scan
Using Chunghwa Precision Test Tech (6217) to explain the one-blade pattern: the first candle was pulled out today, with over 1 wan (ten-thousand) lots of volume at the bottom, and the speaker thinks the volume has digested the bottom's supply of shares and there is a chance to move up, with entry and exit left to each person. Next, check whether the same sector turns stronger together, and look at the MACD technicals and chip data such as foreign investors and yesterday's newly added margin. One stock the speaker holds did not exit today, with a gain of about 20-something% (originally over 30%), and he thinks anything under 1000 is cheap. In the PCB sector, disposition stocks pulled up most clearly, such as Taiwan Union Technology, while Co-Tech Development (8358) returned to its platform.
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33:15Weak Stocks Breaking Lines and Heavy-Volume Warnings
AUO's trend has weakened: the speaker says bottom-fishing can only be short-term; earlier he dared to because the defensive range was only 2–3%, but it broke the monthly line again today, so he would leave on a break here. He also warned that a black candle on heavy volume at a high with huge volume is a warning sign, he dislikes this pattern, and he said then that if it breaks the 5-day line again the next day it's time to go, citing Taiwan Surface Mounting Technology as an example.
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35:55Grand Pacific Petrochemical's Bottom Pattern and Foreign Investor Moves
For those wanting to wait at AUO: after it finishes consolidating there is still a chance of another rally, and there is still a piece of good news yet to come; the speaker stresses that in a bull market there are no bad companies, only whether they are cheap enough, and AUO's drop of only 4% on breaking the monthly line is acceptable. Grand Pacific Petrochemical hit limit-up and after yesterday's gap formed a one-blade pattern, with its bottom at the 5-day line and the low of a red candle, so holding that level is enough; big players bought yesterday and today with a cost around the 5-day line, foreign investors have bought a lot recently, and the chart looks good, so he is interested. Nan Ya Plastics almost made a new high today, but its pattern is already very beautiful.
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38:15Elite Material's Limit-Down and Irreplaceability
The turnover ranking is mostly regular-army names such as TSMC, Nanya Technology, Nan Ya Plastics, Largan and Yageo, but a lot of today's volume was from selling. Elite Material hit limit-down; the speaker says not to fear: falling to this level it will find support, moving averages need not be considered, and it is a company no one can replace, which Taiwan stocks need to pass 5 wan (ten-thousand) points. In the middle he chatted about Akaza from Demon Slayer, and at the end he used a line from a Stephen Chow film to describe Elite Material as a firefly in a pitch-black night sky, saying Elite Material's time is coming.
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42:45Leaders Going Long Together and Landmark Optoelectronics
On another stock that hit limit-down, the speaker says that returning to the trend line has support, foreign investors are still buying, and three wealthy players are long together; as long as those three don't exit, he won't exit, that is, 'if they don't move, I don't move.' Landmark Optoelectronics (3081) still has its quarterly line, and in a bull trend when a big stock returns to the quarterly line he can only lean bullish unless the index goes down; today's low was 2725, a pullback of about 24.4% from 3600, which is a satisfying point. He can skip optical communications but doesn't dare short it, thinks Largan and Landmark Optoelectronics make different things, and if it falls further he would rather lean toward buying.
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45:15Retail and Investment Trust Chip Scan
Retail investors' favorite buy today was TSMC, which the speaker sees as good, meaning retail is willing to come back, and people who buy TSMC are less likely to sell; next were UMC, Winbond and Compeq. Compeq has a low-earth-orbit satellite theme, but there is still a lot of trapped supply overhead, and the speaker says it needs time; he also mentioned that among low-orbit satellite stocks Auden Techno (3491) pulled back today, which he thinks only means this wave failed and big players didn't leave, and if they haven't gotten out they will have to pull it up once more to escape. The market only turns bearish if it breaks the monthly line. On investment trusts, the ETF daily report lists Compeq, Largan, GlobalWafers and others as adds and cuts; the speaker noted trusts were picking up GlobalWafers and thinks that after the trusts finish selling this candle they won't sell heavily in the next couple of days. His exposure is about 70–75%, and he reminded that a stock exiting its disposition period tomorrow hasn't risen much during it, so he will start watching it.
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